Transportation Secretary Ray LaHood has announced that the Car Allowance Rebate System, colloquially known as "cash for clunkers," will end its month-long run Monday, well before its scheduled ending date of November 1. As of Thursday, dealers had registered 457,000 transactions worth $1.9 billion.
The program originally was to receive $4 billion, but that was cut to $1 billion. When that appropriation lasted less than a week because of consumer interest, Congress approved another $2 billion, which was also supposed to carry the program to November 1.
The deadline gives consumers four more days to buy new, more fuel-efficient vehicles than what they now own, while obtaining a trade-in subsidy of $3500 or $4500 for their old models. In a statement, LaHood said:
"This program has been a lifeline to the automobile industry, jump-starting a major sector of the economy and putting people back to work. ...
"It’s been a thrill to be part of the best economic news story in America. ... Now we are working toward an orderly wind down of this very popular program."
Dealers have expressed concern that they have so far received less than 10% of the applied-for reimbursements from the government, something Rep. Joe Sestak of Pennsylvania and Sen. Harry Reid have complained about. Incomplete applications are blamed for some of the delay, but LaHood says more processors have been hired to speed up the reimbursements. GM Motors said Thursday that it would provide cash advances for dealers who haven't yet received reimbursements.
Both GM and Ford have called workers back to ramp up production to restore dealers' inventories cleared by sales associated with the CARS program. How the early cut-off may affect the automakers' plans is unknown. Before the CARS program was rolled out, some critics claimed it would distort the market and simply pull new car demand from later in the year into the summer months. The Los Angeles Times reported:
Economists credit the program with reviving moribund car sales. But with the cash incentives gone, some fear the newly buoyant auto market could quickly crash in its wake -- just as automakers rushed to boost production in response to clunker-driven sales.
"Life after "cash for clunkers" is going to be a tough one," said Jesse Toprak, vice president of industry trends at TrueCar, which tracks vehicle sales and pricing. He predicted "a steep decline in sales" after the end of the program, which gives out $3,500 and $4,500 vouchers in exchange for qualifying used cars.
Still, there's little doubt that the program, known officially as the Car Allowance Rebate System, has succeeded in boosting sales. According to a projection by J.D. Power & Associates, sales will top 1 million vehicles in August, the first time in a year that that milepost will have been reached.
There is no plan to seek more funding.